All You need to know about car insurance

By: | Updated: June 22, 2016 5:36 PM

Car insurance: There are two types of car insurance available in Indian market. One is Third Party Insurance Policy and the second is Comprehensive Insurance Policy.

Car insurance

Car insurance: There are two types of car insurance available in Indian market. One is Third Party Insurance Policy and the second is Comprehensive Insurance Policy.. (Reuters)

There is a significant increase in the number of vehicular accidents in the country, according to government data. Beyond the unfortunate loss of life and limb, the biggest concern for car owners is the high costs of repairs after an accident. To protect them from these unexpected expenses, we have car insurance.

There are two types of car insurance available in Indian market. One is Third Party Insurance Policy and the second is Comprehensive Insurance Policy.

Third Party Insurance Policy (TPI)
This policy covers its owner from any liability towards a third party caused due to the accident of the car. The coverage includes death, injury, or property damage to third parties. This does not cover the damage caused to the car. A TPI is legally compulsory in India under Section 146 in The Motor Vehicles Act, 1988. According to Sec. 158 read with Sec 177 of The Motor Vehicles Act, 1988, a penalty of Rs. 100 for the first time and Rs. 300 for subsequent offences can be levied on a person who hasn’t done a TPI on his car.

Comprehensive Insurance Policy
It covers the risk to the owner and the car. The loss of, or damage to, the car is covered by the insurer. It also covers the owner for his life, disability or critical position due to accident. Comprehensive policy is available in two types, i.e. a traditional policy or a cashless policy.

Traditional Policy
Under traditional comprehensive car insurance policy, the claims are settled after the repairing of the car. First, the owner has to settle the expense by himself and then submit the bills along with the claim form to the insurance company. After that, the insurance company settles his claim on the basis of its survey report. Generally, the full amount is not reimbursed in this policy. There may be occasional procedural delays in your reimbursements.

Cashless Policy
Under cashless insurance, the owner needs to pay only a small part of the repair expense. Insurance companies have tie-ups with a number of garages and car care providers in India. If the car is repaired at a network garage, the owner needs to pay only the mandatory charges and rest is paid by the insurance company directly to the garage. The insurance company deducts the depreciation amount on certain parts depending on the year of use and deducts 50% on plastic parts. The key benefit of cashless insurance is its fast and hassle-free process where the owner has to bear a very small part of the expenses.

Things To Know

Here the key things to know before buying comprehensive insurance.

What is covered under comprehensive car insurance?

-Comprehensive insurance not only covers bodily injuries of the insured but also of his family members.
-It covers the insured even if he has hired a driver who is behind the wheels at the time of the accident.
-Any damage due to man-made calamities like theft, burglary, loot etc, will also be covered by the insurance company.
-If there is loss due to fire, rock slide, earthquake, flood, thundering or any other natural calamity, such a loss will be covered by insurance.

What is not covered under comprehensive car insurance?

Normal wear and tear of the car, failure of body parts and engine, mechanical and electrical faults.

-If the accident is caused by the insured person driving under the influence of alcohol or any other intoxicant.
-If there is any damage to the car during a war.
-If the car driver does not hold a valid license.
-If the owner intentionally damages the car or gets it intentionally done by a third party.
-If the car is used in programmed racing

Insured Declared Value (IDV)
IDV is the value of car on which insurance has been provided. The premium is calculated on the basis of IDV. The greater the IDV, bigger the premium. Remember that lowering the value of car to minimize the premium is not a good practice. This may result in inadequate payment of compensation in case of an accident or theft of the car. Also, while calculating the resale value of car, IDV plays an important role.

Zero Depreciation Insurance
A normal car insurance policy reimburses a claim after deducting the depreciation on the car. Under the Zero Depreciation Policy, the claim is paid in full irrespective of the rate of depreciation on the car. Even the plastic parts are covered in full. This policy is allowed only for first few years.

No Claim Bonus (NCB)
NCB is an amount of discount on premium given at the time of renewal of policy. If there is no claim made during the previous year, the company allows a discount on the premium at a predetermined rate. More the number of claim free years, more will be the rate of NCB. It varies from 10 to 50%, depending on the number of claim-free years. NCB can also be transferred while buying a new car.

The author is CEO

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition